Ep #90: The Myth of Fee Compression for Financial Advisors - Co-hosted by Alan and Michael

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This week Alan & Kitces talk about a subject that's been on a lot of advisors' minds with the rise of robo-advisors and big firms like Vanguard: fee compression. It might sound like a strange or complicated term, but it's basically the idea that as the financial planning/asset management space becomes more crowded, advisors with smaller firms will have to reduce their fees and eventually go out of business.

Kitces and Alan break down the different versions of fee compression that they do and don't see in the financial advisory marketplace, and they talk about why they think niched advisors are going to continue to succeed. They also touch on the legitimacy that big companies like Vanguard and Schwab are bringing to our profession, making financial advising more familiar and accessible to more people.

Kitces also talks a bit about his new show, Financial Advisor Success, and whether his guests have validated fears about fee compression or unsustainability of the marketplace. Alan highlights the benefits the big moves of large firms will have for younger advisors, who will be able to get legitimate financial planning experience much earlier in their careers.

Long story short: we'll be just fine, and a niche is (almost) always a good idea.

Listen to the Full Interview:

 

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What You'll Learn from This Episode:

  • The definition of fee compression and why the idea has some financial advisors worried.
  • The current and future effects of big moves by companies like Vanguard and Schwab in the CFP and advisory space.
  • Why advisors with smaller firms - around 100 clients - can remain competitive and successful in a market that's going to expand in the near future.
  • How financial planning as a profession will become more widely accepted thanks to increasing accessibility for consumers.
  • Why you shouldn't try to outdo or directly compete with robo-advisors in asset management.
  • The impact of the growing marketplace on young advisors who might have previously doubted the sustainability of a career in financial planning.

Featured on the Show:

Ep #294: Building an Authentic Firm That’s a Magnet for Clients: A Discussion with Anna N’Jie Konte Ep #294: Building an Authentic Firm That’s a Magnet for Clients: A Discussion with Anna N’Jie Konte
Ep #147: Serving Cross Border Clients with Assets in Multiple Countries - The Career of Xavier Maldonado Ep #147: Serving Cross Border Clients with Assets in Multiple Countries - The Career of Xavier Maldonado
Ep #146: Buying a Firm from Their Father - The Careers of Taylor Anderson & Kailie Abascal Ep #146: Buying a Firm from Their Father - The Careers of Taylor Anderson & Kailie Abascal
Ep #130: From $0 to $250,000 Annual Revenue in Just 13 Months - The Career of Patrick Brewer Ep #130: From $0 to $250,000 Annual Revenue in Just 13 Months - The Career of Patrick Brewer
Ep #129: Basing Fees on Complexity - The Career of PJ Wallin Ep #129: Basing Fees on Complexity - The Career of PJ Wallin

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